[The Sun] Highway concession agreements go public

6012009

~ by Karen Arukesamy and Tan Yi Liang

(From Left- Right) Segambut MP Lim Lip Eng, PJ Utara MP Tony Pua and Serdang MP Teo Nie Ching showing the some of the important findings from the toll concession agreements which they reviewed within the 2 hour given for viewing the declassified agreements.

KUALA LUMPUR: The concessionaire for the Damansara-Puchong Highway (LDP) spent RM1.327 billion to build the heavily-used highway and was projected to make a profit of RM18.865 billion over the 30-year concession period.

In revealing this after studying the declassified LDP concession agreement yesterday, Petaling Jaya MP Tony Pua, an economist, told a press conference: “This is in excess of about 14 times the capital. Even in the period of 1997-2006 alone, the concession holder Lingkaran Transkota Sdn Bhd (Litrak) was to have made RM1.222 billion, which is nearly the cost of construction (of the highway).”

He claimed the company is “making excessive profi t with its toll charges”.

“Whatever that has been collected today, I believe, has more than paid for the highway,” Pua said in substantiating his argument that the toll rates are too high. He said whatever Litrak will collect for the next 20 years is “definitely excessive profit”.

He said the 30-year concession agreement can be expropriated or bought over by the government, if that is in the national interest.

Under the expropriation clause, the government may terminate or expropriate the concession by giving three months’ notice.

However, he said the government has always said that buying back the concessions will cost them billions of ringgit.

He said if the government has to collect toll, it can charge a lower rate and the money can be used for essential public transport services.

Pua said if it was to be expropriated, the government will have to pay the concessionaire the value of the construction work and any interest on the loan given by the shareholders to the concessionaire.

“From that perspective, I don’t see what is the problem. It will not cost the government billions.”

Views from those who studied the other contracts:

» Segambut MP Lim Lip Eng said a “support loan” given to the concessionaire for the Cheras-Kajang Highway can cause problems for the contract.

“The agreement said Grand Saga must have a minimum paid-up capital of RM5 million with a maximum of RM50 million. On the other hand, it is also stated that the government has to give a ‘support loan’ of RM59 million to Grand Saga.”

Lim said the terms of the loan were in another document to which he did not have access.

“If Grand Saga is unable to pay the loan, what can the government do? We don’t know.”

The lawyer also revealed that the government had agreed to compensate Grand Saga for any termination of contract, describing it as unfairly beneficial to the company.

“The concession company makes money out of nothing.”

» Kepong MP Dr Tan Seng Giaw, who reviewed the Smart Tunnel concession agreement, said there are no proper details of the tunnel construction. The construction cost is RM1.3 billion but there are no details on estimated profit. He believes the agreement is incomplete and due to that it can be invalid.

» Serdang MP Teo Nie Ching, a lawyer, said the government could stand to lose if it tries to take over the 25-year Penang Bridge concession. “Not only do they need to settle the loan, they need to compensate for future profits.

“If they terminate the agreement in the first 10 years, the government would have to pay compensation of 10 years of pre-tax income, and after that the government will have to pay the estimated remaining profits.”

She said the agreement gave the concessionaire the right to take all profi ts from the tolls after paying RM550 million to take control of the bridge from the government in 1993.» MCA Youth legal affairs, Parliament bills and strategic studies bureau chief Wong Nai Chee will propose that all toll concession agreements adhere to common standards regarding the compensation formula, elements of loan given, expropriation clauses and the viability of privatisation.

He also said his proposals will be presented to MCA ministers to be raised in the cabinet.

“Among the striking points which we found is the RM300 million loan which the government gave to Sistem Lingkaran Lebuhraya Kajang (SILK) concessionaire for its Kajang-Semenyih Highway,” Wong said, adding RM80 million was interest free while RM220 million carried an 8% interest per annum.

“The purpose of the RM300 million advance loan granted by the government was to construct low-cost houses for the relocation of squatters and so on,” he said.

He also said the SILK concession agreement has an expropriation clause that states that the government can take over the concession even during the concession period if it is of public interest.

» MCA information chief Lee Wei Kiat said the party’s Youth wing will set up a committee, comprising several lawyers, to study the agreements between the government and 22 highway concession companies nationwide.

Among the issues are the compensation of RM104 million given to the concession company that built the Grand Saga Highway for not increasing their toll rates.

“We will study the method of the loan given to the company by the government. It is the government’s responsibility to pay compensation but there is no clear method of paying the compensation.”

In the LDP agreement, if the profi ts exceeded the targeted amount, it would be divided equally between the concession company and the government, Lee said.

However, the profi ts were not recorded. Lee urged the government to reveal the profi ts obtained.

Busy reading: Visitors to the library going through the toll agreements at the Works Ministry in Kuala Lumpur Monday.

KUALA LUMPUR: Confusion reigned at the library in the Works Ministry on the second day after toll agreements in the country were declassified.

Politicians and reporters, who had turned up as early as 7.30am to get access to the documents although the library opened at 9am, were dismayed to find that much of the contents were either too technical, incomplete or that they just had no time to digest the information.

With public viewing in the morning restricted to only five people at one time for a maximum of two hours and one document each, reporters had to rely on information supplied by politicians, who were given priority to read the agreements.

As at lunchtime, only one reporter had managed to read an agreement relating to the New Pantai Express­way but complained that she could not fully understand the content or compensation formula.

In the evening, however, 15 people were allowed in at one time after Works Minister Datuk Mohd Zin Mohamed gave the directive to the library to expand the facility.

There was also grumbling after some of the reporters, who had turned up early for their turns to look at the documents, got bumped down in the queue after politicians made an earlier booking with the library,

Among the “incomplete” documents were the deals for the SMART Tunnel, which only came with the first 118 pages without any appendix or schedules, and the Shapadu toll agreement, which was only 16 pages long. None of the agreements also carried with any subsequent exemption or additional clauses.

Petaling Jaya Utara MP Tony Pua, who led a DAP delegation, said the Damansara-Puchong Highway was making excessive profits and called for the Government to stop compensating the operator.

The highway operator had initially set its toll rate at RM2.10 but reduced it to RM1.60 in the last adjustment in 2007.

“Under the agreement, the toll charge will rise to RM3.10 in 2016. In its financial prospectus, the highway operator has stated that the construction cost was RM1.327bil and that the 30-year projected profit was RM18.865bil.

“Between 1997 and 2006, it was supposed to have made a profit of RM1.22bil, nearly the construction cost. So, their collection to date has more than paid for the highway and what they are collecting for the next 20 years, is excess profits,” he said, adding that to allow Kesas to raise toll charges by more than 10% every two years until 2022 was also excessive.

Pua called on the Government to nationalise the highways to lighten the financial burden of the people and keep toll charges minimum.

Serdang MP Teo Nie Ching said the agreement with Penang Bridge almost guaranteed profit for its highway operator, adding that this was unfair because the bridge had been opened since 1985 whereas the agreement only started from 1993.